High costs of imports combine with rising oil prices and Brexit uncertainty to keep inflation high over the summer
Wholesale foodservice price inflation grew to 9.3% in August 2017 to reverse two months of reductions, the new edition of the CGA Prestige Foodservice Price Index reveals.
Inflation has grown by more than two percentage points from 7.0% in July – compared to figures of 8.8% in June and 9.0% in May. Foodservice price inflation was well ahead of historical averages throughout the summer months, and is significantly higher than consumer-side inflation as measured by the Office for National Statistics.
Year on year, levels of inflation in August were higher in nine of the ten categories of food and drink measured by the Foodservice Price Index. Key factors driving inflation include the weak pound, which is pushing up the price of imports from overseas; and rising oil prices, which are adding to the costs of transportation and packaging.
Foodservice items with particularly high levels of inflation in August include Fish, where it soared to 22.7% from 5.0% in July. As well as the double whammy of low exchange rates and high oil prices, costs here have been increased by concerns over the future availability of tuna and ongoing lice problems affecting salmon supplies.
Other categories with double-digit inflation in August include Oils and Fats and Milk, Cheese and Eggs, where levels were 15.4% and 14.7% respectively. The only category to see deflation year on year in August is Sugar & Confectionary, where prices fell by 2.1% compared to last year. Meat prices also fell to a four-month low, thanks to improved supplies in the UK, but is still more expensive than in August 2016.
The Foodservice Price Index also highlights possible future pressures in categories including Fruit and Vegetables caused by labour shortages. The weak pound and uncertainty over worker status following Brexit talks may lead to shortages of migrant pickers for domestic fruit and vegetable growers from 2018, weakening supplies and increasing the UK’s dependence on imports.
With Brexit negotiations likely to hold down the value of sterling, and oil prices unlikely to fall in the near term, the Foodservice Price Index forecasts little respite for inflation in most food and drink categories in the coming months.
Christopher Clare, Head of Consulting & Insight at Prestige Purchasing, said: “With the CGA Prestige Foodservice Price Index up over 2 percentage points on last month, we are now experiencing the highest year on year movement since the index began. We have seen high increases in nearly every category compounded by a weak pound and a number of supply issues in key categories.”
CGA Commercial Director Graeme Loudon said: “After a couple of months of a modest easing of pressures, our latest Foodservice Price Index reveals another upswing in inflation. The weak pound and increased oil costs are both conspiring against UK businesses, and specific categories of food and drink are facing added challenges like weather-related production issues and changing trading patterns. All of these issues are outside the control of the foodservice supply chain in the UK, but by carefully monitoring trends and refining purchasing strategies, foodservice businesses can at least mitigate some of the inflationary impacts.”
The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA, using foodservice data drawn from 7.8m transactions per month. More information on specific categories is available on a subscription basis.